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Vectura Group plc: Pre-close update

Significant business development progress with year-end revenues in line with expectations

Chippenham, UK – 11 January 2017:Vectura Group plc (LSE: VEC) (“Vectura”, “the Group”), an industry-leading device and formulation business for inhaled airways disease, today announces an unaudited pre-close update ahead of its results for the nine months ended 31 December 2016, due in March.

Following the step-change in financial performance announced in the interim results in November, further significant progress was made in December with the announcement of a global pMDI triple programme with Mundipharma, confirmation of the US commercialisation for Ultibro® and Seebri® and the first approval using Vectura’shandheld FOX® smart nebuliser as part of a referenced labelled product.

Trading

Revenues for 2016 are anticipated to be in line with the Board's expectations with positive momentum from the seven key recently-launched inhaled products including flutiform®, Ultibro®Breezhaler®, Seebri® Breezhaler®and the GSK Ellipta® products (Breo®/Relvar®Ellipta®, Anoro® Ellipta® and Incruse® Ellipta® ) providing a strong base of recurring revenue. The continued weakness of sterling against the Group’s main trading currencies, in particular the US dollar and Euro, has also benefited reported results. Volumes in the flutiform® supply chain have been at record levels and good progress is being made with the previously-announced capital expenditure initiatives to expand capacity. Ultibro continues to benefit from strong data from the FLAME study as well as the results of the CRYSTAL study showing improved lung function and COPD symptoms after direct switch from previous treatment.

In addition, on 6 January 2017 Pacira Pharmaceuticals, Inc. reported preliminary unaudited net sales of EXPAREL®in Q4 2016 were $71.4 million, compared to $67.2 million for Q4 2015. The Group earns a three percent. share of net sales (on a cash received basis) and is also eligible for a sales milestone of $32 million when worldwide annual net sales of the product reach $500 million (on a cash received basis).

Pipeline progress

On 23 December a global development and licence agreement was signed with Mundipharma International Corporation Limited and a US independent associated company (“Mundipharma”) for the VR2076 pressurised Metered Dose Inhaler ("pMDI") ICS/LABA/LAMA triple programme. Following successful completion of feasibility work, which Vectura was responsible for, Mundipharma confirmed the exercise of its option to develop and commercialise VR2076 initially in asthma. This exercise triggered a payment to Vectura of €1.5 million. The Group is also eligible to earn further total potential milestones up to €46.5 million linked to development, regulatory and launch progress of the programme as well as royalties on any future net sales of the product. The first regulatory filings of VR2076 are planned in the EU for late 2022/early 2023. This agreement extends our successful collaboration with Mundipharma on flutiform®and, along with the Novartis QVM149 DPI programme, increases the Group's exposure to the important emerging triple combination class.

On 21 December Novartis signed a licensing agreement with Sunovion Pharmaceuticals Inc., a strong established respiratory business with an existing COPD portfolio, to commercialise Utibron™ Neohaler® and Seebri™ Neohaler® in the US. The Group expects these products to be launched in H1 2017 and will receive royalties on any future net sales, making a further contribution to the substantial existing recurring and growing royalty stream we currently receive from Novartis.

On 22 December Bayer AG ("Bayer"), our partner on VR876, confirmed completion of the EU regulatory procedure that allows an alternative nebulised delivery (method of administration) for its currently marketed product Ventavis (iloprost) using Vectura's handheld smart nebuliser FOX®device which Bayer has branded Breelib®. The positive regulatory action on this programme with Bayer is particularly significant as it represents the first regulatory approval and progression to commercialisation of Vectura’s FOX®smart nebuliser as part of a referenced labelled product. Although the financial value for the Group from this programme will be relatively modest, given the small patient population, this external platform validation coincides with sustained interest from multiple potential collaborators seeking to leverage the FOX's unique drug device technology. We look forward to concluding a number of these new partnerships in 2017.

“Vectura starts 2017 in a strong position with significant progress made with the pipeline and sustained growth momentum in recurring revenues driven by the seven recently launched inhaled products.
We look ahead now to reporting our 2016 preliminary results in March, further pipeline news flow and leveraging Vectura’s proven device and formulation capabilities through additional business development opportunities. An important part of our news flow for 2017 remains VR315, our generic Advair® Diskus® programme partnered with Hikma. This programme remains under FDA regulatory review and we continue to work closely with our partner through this process. VR315 has a GDUFA goal date of 10 May 2017 and is one of only two generic Advair® Diskus® ANDAs publicly filed and accepted.”

About Vectura

Vectura, a FTSE250 company listed on the London Stock Exchange (LSE: VEC), is an industry-leading inhaled airways disease focused business with proprietary formulation and devices across DPI, pMDI and “smart” nebulisation platforms. With our extensive range of technologies, capabilities and collaborations, we believe we can become a leader in the development of inhalation products, increasing our ability to help patients suffering from respiratory diseases. In June 2016 Vectura completed a merger with Skyepharma PLC.

Vectura has seven inhaled, four non-inhaled and ten oral products marketed by partners with growing global royalty streams, and a portfolio of drugs in clinical development, a number of which have licence agreements with several global pharmaceutical and biotechnology companies including Hikma, Novartis, Sandoz, Mundipharma, Kyorin, Baxter, GSK, UCB, Ablynx, Grifols, Chiesi, Almirall, Janssen, and Tianjin KingYork.

For further information, please visit Vectura's website at www.vectura.com.

Forward-looking statements

This press release contains forward-looking statements, including statements about the discovery, development and commercialisation of products. Various risks may cause Vectura's actual results to differ materially from those expressed or implied by the forward-looking statements, including: adverse results in clinical development programmes; failure to obtain patent protection for inventions; commercial limitations imposed by patents owned or controlled by third parties; dependence upon strategic alliance partners to develop and commercialise products and services; difficulties or delays in obtaining regulatory approvals to market products and services resulting from development efforts; the requirement for substantial funding to conduct research and development and to expand commercialisation activities; and product initiatives by competitors. As a result of these factors, prospective investors are cautioned not to rely on any forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.